People walk in front of the the U.S. Department of Education, amid reports that U.S. President Donald Trump’s administration will take steps to defund the federal Education Department, in Washington, U.S., February 4, 2025.
Kevin Lamarque | Reuters
Despite the government shutdown, the U.S. Department of Education is sending out notices to student loan borrowers that their debt will soon be canceled.
“You are now eligible to have some or all of your federal student loan(s) discharged because you have reached the necessary number of payments under your Income-Based Repayment (IBR) Plan,” reads an email sent to a borrower. CNBC reviewed multiple notices to borrowers.
According to the department email, the recipient’s loan discharge will be processed “over the next several months,” and borrowers have until Oct. 21 to opt out of the relief.
In July, the Education Department announced it would temporarily stop forgiving the debt of borrowers enrolled in the IBR plan. Under its terms, IBR concludes in debt erasure after 20 years or 25 years of payments, depending on the age of a borrower’s loans.
The development sparked panic among borrowers. After recent court actions and Congress’ passage of President Donald Trump’s “big beautiful bill,” which phases out several existing student loan repayment plans, IBR is the only plan available at the moment that offers debt forgiveness.
The department said that it needed to pause the relief while it responded to court orders that changed which periods counted for loan forgiveness.
With the relief on pause, many borrowers who’d been in repayment for decades were stuck carrying a debt that — according to their loan terms — they should no longer owe.
The delayed IBR loan forgiveness became a central issue in the American Federation of Teacher’s legal battle with the Education Department. The teacher’s union, which represents nearly 2 million members, filed a lawsuit against the Trump administration in March, accusing it of depriving student loan borrowers of their rights.
The union had pointed out that if the IBR loan discharges occurred after December, borrowers could be saddled with a huge tax bill.
The American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level through the end of 2025. Trump’s “big beautiful bill” did not extend or make permanent that broader provision.